Staking

Staking is a financial term unique to cryptocurrency markets. It consists of keeping one’s cryptocurrencies locked in a specific network in order to obtain rewards in return, in the form of cryptocurrency. Only certain cryptocurrencies which have a particular blockchain support staking.

By staking a number of cryptocurrencies, you can participate in the validation of transactions on the blockchain and in return receive rewards from the network. The stake, the amount of cryptocurrency staked, remains locked in place as long as the Validator continues to do its work and it cannot be sold or transferred. The stake guarantees the Validator’s goodwill, and if they were to misbehave, the stake would be removed. The algorithm of this consensus mechanism then selects block validators from all those who have staked tokens as collateral.

On some blockchains, staking also allows participation in the governance of the project.

For those who do not have the resources or expertise to open a node and become a validator, staking means owning the native tokens of a given blockchain and depositing them in a third-party service for staking. Staking can be done through centralised exchanges, in staking platforms or in decentralised protocols and dapps such as Yearn Finance or Compound. The rewards for staking are variable and are expressed in APY (Annual Percentage Yield).

Correlated words

TVL

Total amount of crypto blocked in a DeFi protocol or decentralised application (dApp).

Wrapped Token

A token representing the value of a cryptocurrency in another blockchain standard.

Bonding

A process in which cryptocurrencies are blocked as a form of commitment to obtain benefits or the right to perform certain activities in a network.

Staking Derivative

Derivatives of staking systems whose value depends on the performance of the staked native tokens and the amount of rewards issued by the network

Yield Farming

A typical feature of decentralised finance (DeFi) that allows people to put their cryptocurrencies to work for a return.

Swap

The conversion of tokens into other tokens on a decentralised exchange.

Smart Contract

An agreement in digital form that allows actions to be triggered automatically if certain conditions are met.

Crypto Lending

A financial service that allows lending and borrowing cryptocurrencies on a centralised or decentralised platform

ERC-20

The Ethereum token standard that has enabled hundreds of projects to launch their own cryptocurrency on Ethereum.

DEX

A Decentralised Exchange allows cryptocurrency trading without intermediaries and directly on the blockchain.

DeFi

Decentralised Finance includes all blockchain-based and decentralised financial solutions.

DApp

Decentralised application allowing the use of a blockchain-based service.

DAO

The Decentralised Autonomous Organisation is a form of automated blockchain governance.

CeFi

Centralised finance is the centralised counterpart of DeFi, but should not be confused with traditional finance.

Arbitrage

Buying and selling in different markets in order to take advantage of the disparity in prices.

APY

A metric often used in DeFi, it indicates the percentage return per year you receive on an investment or loan.

APR

The annual percentage rate you receive for an investment or loan.

AMM

Automated Market Makers are smart contracts adopted by decentralised exchanges to automatically execute orders.

Aggregator

An online collector of similar content or services from different sources for easy access. An example is Yearn Finance